2001-04-05 ace limited (nyse: ace) def 14a

8/7/2019 2001-04-05 ACE Limited (NYSE: ACE) DEF 14A

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DEF 14A1ddef14a.txtDEFINITIVE NOTICE & PROXY STATEMENT

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the SecuritiesExchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THECOMMISSION ONLY (AS PERMITTED BYRULE 14A-6(E)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12

ACE Limited--------------------------------------------------------------------------------

(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computedpursuant to Exchange Act Rule 0-11 (set forth the amount on whichthe filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by ExchangeAct Rule 0-11(a)(2) and identify the filing for which the offsetting feewas paid previously. Identify the previous filing by registration statement

http://www.sec.gov/Archives/edgar/data/896159/00009501

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number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:

[ACE LOGO]

NOTICE OF ANNUAL GENERAL MEETING

April 3, 2001

Hamilton, Bermuda

TO THE SHAREHOLDERS OF ACE LIMITED:

The Annual General Meeting of ACE Limited (the "Company") will be held on

Friday, May 11, 2001, at 9:00 a.m. at The Fairmont Hamilton Princess, 76 Pitts

Bay Road, Pembroke, Bermuda, for the following purposes:

1. To elect five directors to hold office until 2004;

2. To vote on a proposal to amend the ACE Limited 1998 Long-Term Incentive

Plan;

3. To ratify the appointment of PricewaterhouseCoopers LLP as the Company's

independent accountants for the fiscal year ending December 31, 2001;

and

4. To transact such other further business, if any, as lawfully may be

brought before the meeting.

Only shareholders of record, as shown by the transfer books of the Company,

at the close of business on March 30, 2001, are entitled to notice of, and to

vote at, the Annual General Meeting.

PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE

FURNISHED FOR THAT PURPOSE, AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN

TO ATTEND THE MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY

REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.

FOR FURTHER INFORMATION CONCERNING THE INDIVIDUALS NOMINATED AS DIRECTORS, USE

OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE PROXY

STATEMENT ON THE FOLLOWING PAGES.

By Order of the Board of Directors,

Brian Duperreault

Chairman and Chief Executive Officer

ACE LIMITED

The ACE Building

30 Woodbourne Avenue

Hamilton HM 08 Bermuda

April 3, 2001

PROXY STATEMENT


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The Board of Directors of ACE Limited (the "Company") is soliciting the

accompanying proxy to be voted at the Annual General Meeting of the Company to

be held at 9:00 a.m. on Friday, May 11, 2001, at The Fairmont Hamilton

Princess, 76 Pitts Bay Road, Pembroke, Bermuda, and any adjournments thereof.

When the proxy is properly executed and returned, the Ordinary Shares it

represents will, subject to any direction to the contrary, be voted at the

meeting in favor of the matters specified in the "Notice of Annual General

Meeting" attached hereto.

Any shareholder giving a proxy may revoke it prior to its exercise by

providing the Secretary of the Company with written notice of revocation, by

voting in person at the Annual General Meeting or by executing a later-datedproxy; provided, however, that the action is taken in sufficient time to

permit the necessary examination and tabulation of the subsequent proxy or

revocation before the vote is taken.

Only holders of Ordinary Shares of record as of the close of business on

March 30, 2001 will be entitled to vote at the meeting. As of the close of

business on March 30, 2001, there were outstanding 231,383,700 Ordinary Shares

of the Company entitled to vote at the meeting, with each Ordinary Share

entitling the holder of record on such date to one vote (except that if, and

so long as, the Controlled Shares (defined generally to include all shares of

the Company directly, indirectly or constructively owned or beneficially owned

by any person or group of persons) of any person constitute 10% or more of the

issued Ordinary Shares, the voting rights with respect to the Controlled

Shares owned by such person shall be limited, in the aggregate, to a voting

power of approximately 10%, pursuant to a formula specified in the Company's

Amended and Restated Articles of Association (the "Articles")).

The election of each nominee for director and the ratification of theappointment of PricewaterhouseCoopers LLP require the affirmative vote of a

majority of the votes cast at the Annual General Meeting; provided there is a

quorum (consisting of not less than six shareholders present in person or by

proxy holding at least 50% of the issued and outstanding shares entitled to

vote at the Annual General Meeting). The approval of the amendment of the ACE

Limited 1998 Long Term Incentive Plan requires the affirmative vote of a

majority of the votes cast at the Annual General Meeting; provided that the

total votes cast on the proposal represent over 50% of the issued and

outstanding shares entitled to vote at the Annual General Meeting. The Company

will appoint one or more inspectors of election to count votes cast in person

or by proxy. Ordinary Shares owned by shareholders electing to abstain from

voting with respect to any proposal and "broker non-votes" will be counted

towards the presence of a quorum but will not be considered present and voting

with respect to elections of directors or other matters to be voted upon at

the Annual General Meeting. Therefore, absentions and "broker non-votes" will

have no effect on the outcome of the proposals to elect directors, to approve

the amendment of the ACE Limited 1998 Long-Term Incentive Plan or to ratify

the appointment of the Company's independent accountants.

A copy of the Company's Annual Report to Shareholders for the fiscal year

ended December 31, 2000 accompanies this Proxy Statement.

This Proxy Statement, the attached Notice of Annual General Meeting and the

accompanying proxy card are first being mailed to shareholders on or about

April 9, 2001.

The Company knows of no specific matter to be brought before the Annual

General Meeting which is not referred to in the attached Notice of Annual

General Meeting. If any such matter comes before the meeting, including any

shareholder proposal properly made, the proxy holders will vote proxies in

accordance with their judgment.

ELECTION OF DIRECTORS

(Item A on Proxy Card)

The Company's Articles provide that the Company's Board of Directors shall

be divided into three classes with the terms of office of each class ending in

successive years. The Company's Articles provide for a maximum of 20 directors

and empower the Board of Directors to fix the exact number of directors and

appoint persons to fill any vacancies on the Board until the next Annual

General Meeting. The Board of Directors has set the number of directors at 16.

The Executive Committee of the Company's Board of Directors has nominated

Brian Duperreault, Robert M. Hernandez, Peter Menikoff, Robert Ripp and Dermot

F. Smurfit for election as directors of the Company to serve three-year terms

to expire at the Annual General Meeting in 2004 and until their respective


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successors shall have been elected and shall have qualified. Each of theseindividuals is currently serving as a director of the Company. There will be avacancy on the Board of Directors as a result of Glen M. Renfrew's retirement.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE NOMINEES

AS DIRECTORS OF THE COMPANY.

It is the intention of the persons named as proxies, subject to anydirection to the contrary, to vote in favor of the candidates nominated by theBoard of Directors. If any one or more of the nominees is unable or unwillingto serve, the proxies will, subject to any direction to the contrary, be voted

for such other person or persons as the Board of Directors may recommend.

Certain information with respect to the nominees for election as directorsproposed by the Company and the other directors whose terms of office asdirectors will continue after the Annual General Meeting is set forth below.

Nominees for Election to Terms Expiring in 2004

Brian Duperreault, age 53, has been a director of the Company since hejoined the Company in October 1994. Mr. Duperreault has served as Chairman andChief Executive Officer of the Company since November 1999 and as Chairman,President and Chief Executive Officer of the Company from October 1994 throughNovember 1999. Prior to joining the Company, Mr. Duperreault had been employedwith American International Group ("AIG") (insurance) since 1973 and served invarious senior executive positions with AIG and its affiliates from 1978 untilSeptember 1994, most recently as Executive Vice President, Foreign GeneralInsurance and, concurrently, as Chairman and Chief Executive Officer ofAmerican International Underwriters Inc., a subsidiary of AIG, from April 1994

to September 1994. Mr. Duperreault was President of American InternationalUnderwriters Inc. from 1991 to April 1994, and Chief Executive Officer of AIGaffiliates in Japan and Korea from 1989 until 1991. Mr. Duperreault serves asa member of The American Academy of Actuaries, a member of the Board ofTrustees of Saint Joseph's University, a member of the College of Insurance's

Board of Trustees and a director of the Bank of N.T. Butterfield & Son(Bermuda).

Robert M. Hernandez, age 56, has been a director of the Company sinceSeptember 1985. Mr. Hernandez has served as Vice Chairman and Chief FinancialOfficer of USX Corporation ("USX") (energy and steel) since December 1994, asExecutive Vice President--Accounting & Finance and Chief Financial Officer ofUSX from November 1991 until November 1994 and as Senior Vice President--Finance & Treasurer from October 1990 to October 1991. In addition to being adirector of USX, Mr. Hernandez is a director and chairman of RTI InternationalMetals, Inc.; a director of the Strategic Investment Fund, Inc. and thePennsylvania Chamber of Business and Industry; vice chairman, board oftrustees of the BlackRock Funds; and a member of the Pennsylvania Business

Roundtable.

Peter Menikoff, age 60, has been a director of the Company since January1986. Mr. Menikoff is currently a private investor and has been interim chieffinancial officer of Vlasic Foods International Inc. since February 2000. Mr.Menikoff served as President and Chief Executive Officer of CONEMSCO, Inc.(oil and gas

2

drilling/production supplies, services and equipment) from April 1997 untilJune 1998. Previously, Mr. Menikoff served as Executive Vice President andChief Administrative Officer of Tenneco Energy Corporation (energy) since June1995. Mr. Menikoff served as a Senior Vice President of Tenneco, Inc.(diversified industrial) from June 1994 until April 1997. Mr. Menikoff served

as Executive Vice President of Case Corporation (agricultural and constructionequipment), a subsidiary of Tenneco, Inc., from November 1991 to June 1994.Mr. Menikoff served as Treasurer of Tenneco, Inc. from May 1989 to November1991.

Robert Ripp, age 59, has been a director of the Company since December1991. Robert Ripp is Chairman of the Board and director of LightpathTechnologies (fiber optics components manufacturing), a Nasdaq listed company.Mr. Ripp also serves as a director of Lightchip Inc., a privately held fiberoptics development venture. Mr. Ripp served as Director, Chairman and ChiefExecutive Officer of AMP Incorporated (electrical connectors) from August 1998through May 1999. Mr. Ripp served as Vice President and Chief FinancialOfficer of AMP Incorporated from August 1994 through July 1998, as VicePresident and Treasurer of International Business Machines Corporation


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(electronic computer equipment) from July 1989 through September 1993 and as a

director of AJ Gallagher Inc. (NYSE), an insurance brokerage company.

Dermot F. Smurfit, age 56, has been a director of the Company since August

1997. Mr. Smurfit has been Joint Deputy Chairman of Jefferson Smurfit Group

plc ("Jefferson Smurfit") (paper, paperboard and packaging) since January

1984, Chairman and Chief Executive of Jefferson Smurfit's continental European

operations from 1994 to 1997, Director of Sales and Marketing since 1997, and

has held a number of other senior positions with Jefferson Smurfit. Mr.

Smurfit is also a director of Smurfit Stone Container Corporation, a U.S.

listed associate of The Smurfit Group. Mr. Smurfit is a member of the Board of

Confederation of European Paper Industries and a member of the advisory Boardof AON Groupe Nederland.

Directors Whose Terms of Office Will Continue after this Meeting

Directors Whose Terms Expire in 2002

Meryl D. Hartzband, age 46, has been a director of the Company since May

1996. Ms. Hartzband is the Investment Director and a Principal of MMC Capital

Inc. (insurance). Ms. Hartzband served as a Managing Director of J.P. Morgan

International Capital Corporation (commercial and investment banking), a

subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan") from August 1994

to February 1999. From 1982 through August 1994, Ms. Hartzband was employed

with J.P. Morgan in various capacities.

Donald Kramer, age 63, has been a director and Vice Chairman of the Company

since July 1996 when the Company acquired ACE Tempest Reinsurance Company

Limited (formerly, Tempest Reinsurance Company Limited; "ACE Tempest Re"), and

was President of ACE Tempest Re from 1996 until 1999. Mr. Kramer served asChairman or Co-Chairman of the Board of ACE Tempest Re from its formation in

September 1993 until July 1996. Prior to the formation of ACE Tempest Re, Mr.

Kramer was President of Kramer Capital Corporation (venture capital

investments) from March to September 1993, President of Carteret Federal

Savings Bank (banking) from August 1991 to March 1993, Chairman of the Board

of NAC Re Corporation (reinsurance) from June 1985 to June 1993, Chairman of

the Board and Chief Executive Officer of KCP Holding Company (insurance) from

July 1986 to August 1991 and of its affiliates, KCC Capital Managers

(insurance investments) and Kramer Capital Consultants, Inc. (insurance

investments), as well as Chairman of the Board of its subsidiary, National

American Insurance Company of California (insurance) from September 1988 to

August 1991. Mr. Kramer is a director of National Benefit Life Insurance

Company of New York City, a wholly-owned subsidiary of Citigroup, a director

of Mapfre America, and a member of the Board of Trustees of the Brooklyn

College Foundation.

Roberto G. Mendoza, age 55, has been a director of the Company since

November 1999 and previously served as a director of the Company from 1985-1996. Mr. Mendoza is Chairman of Egg plc (banking). Mr. Mendoza served as a

managing director of Goldman, Sachs and Co. (banking) from September 2000

until January 2001. Mr. Mendoza served as Vice Chairman and director of the

Boards of J.P. Morgan & Co. Incorporated and its subsidiary Morgan Guaranty

Trust Company of New York (banking) from 1990 to April 12, 2000. Mr. Mendoza

is a director of Prudential Banking PLC, Reuters Group PLC, and Vitro S.A.

3

Walter A. Scott, age 63, has been a director of the Company since September

1989. Mr. Scott served as a consultant to the Company from October 1994 until

September 1996. Mr. Scott served as Chairman, President and Chief Executive

Officer of the Company from March 1991 until his retirement in September 1994

and as President and Chief Executive Officer from September 1989 to March

1991. Mr. Scott is a director of Annuity and Life Re, Ltd. and a trustee of

Lafayette College.

Sidney F. Wentz, age 69, has been a director of the Company since May 1993.

Mr. Wentz served as the Chairman of the Board of Trustees of The Robert Wood

Johnson Foundation (charitable foundation) from June 1, 1989 through June

1999. From February 1987 until July 1988, Mr. Wentz served as Chairman and

Chief Executive Officer of Crum & Forster, Inc. (insurance). Mr. Wentz is a

director of Castle Energy Corporation, a director of The Bank of Somerset

Hills, and a trustee of Drew University.

Directors Whose Terms Expire in 2003

Michael G. Atieh, age 47 has been a director of the Company since September


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1991. Mr. Atieh has served as Senior Vice President and Chief Financial

Officer of Dendrite International, Inc. (software) since October 2000, as Vice

President, U.S. Human Health, a division of Merck & Co., Inc. ("Merck")

(pharmaceuticals) from January 1999 to September 2000, as Senior Vice

President--Sales of Merck-Medco Managed Care, L.L.C. (managed health care), an

indirect wholly-owned subsidiary of Merck from April 1994 to December 1998, as

Vice President--Public Affairs of Merck from January 1994 to April 1994 and as

Treasurer of Merck from April 1990 to December 1993.

Bruce L. Crockett, age 57, has been a director of the Company since May

1995. Mr. Crockett is currently a private investor. Mr. Crockett served as

President and Chief Executive Officer of COMSAT Corporation ("COMSAT")(information services) from February 1992 until July 1996 and as President and

Chief Operating Officer of COMSAT from April 1991 to February 1992. Mr.

Crockett was an employee of COMSAT since 1980 and held various operational and

financial positions including Vice President and Chief Financial Officer. Mr.

Crockett is Chairman of the Board of NETSAT28, Datapipe.com and Teletronics

International Inc. Mr. Crockett is also a director of International Business

Network for World Commerce & Industry, Ltd. (IBNET), Para-Protect Services,

Inc., the AIM Mutual Funds Boards, and DATABID.COM. Mr. Crockett is also a

member of the Board of Trustees of the University of Rochester.

Thomas J. Neff, age 63, has been a director of the Company since May 1997.

Mr. Neff has been with Spencer Stuart & Associates, N.A. ("Spencer Stuart")

(executive search consulting) since 1976 serving as President of the worldwide

firm from 1979 to 1996. Since 1996, Mr. Neff has served as chairman of Spencer

Stuart, U.S. Mr. Neff is a director of EXULT, Inc. and various mutual funds

managed by Lord, Abbett & Co.

Robert W. Staley, age 66, has been a director of the Company since January1986. Mr. Staley retired March 1, 2000 as an officer and director of Emerson

Electric Co. ("Emerson") (electric equipment) where he had been employed since

1975, serving as Vice Chairman since November 1988. Mr. Staley continues to

serve Emerson as a Senior Advisor.

Gary M. Stuart, age 60, has been a director of the Company since March

1988. Mr. Stuart has been Chief Financial Officer of Optimum Logistics Inc.

(Internet-based logistics services) since August 2000. From January through

May 2000, Mr. Stuart was an Executive-in-Residence at the Lubin School of

Business at Pace University and was on the adjunct faculty at Fairfield

University. From 1981 until November 30, 1999, Mr. Stuart was an employee of

Union Pacific Corporation (transportation), serving as its Executive Vice

President and Chief Financial Officer from June 1998 through November 1999 and

as its Vice President and Treasurer from January 1990 through May 1998.

There are no arrangements or understandings between any director and any

other person pursuant to which any director was or is selected as a director

or nominee.

4

Meetings and Committees of the Board of Directors

During the year ended December 31, 2000, all incumbent directors, except

Mr. Mendoza, attended at least 75% of the aggregate number of meetings of the

Board of Directors and committees of the Board of which they were a member

(during the period served). Mr. Mendoza attended 75% of the Board meetings and

50% of the meetings of the Executive Committee and the Compensation Committee

held during 2000.

The Board of Directors has established four standing committees: the Audit

Committee, the Compensation Committee, the Executive Committee and the Finance

Committee.

Audit Committee

The Audit Committee is composed entirely of non-management directors, each

of whom is independent of the Company and its management, as defined by the

New York Stock Exchange listing standards. The Audit Committee provides

oversight of the financial reporting process, the system of internal controls,

the audit process, the performance of the Company's internal auditors and the

performance and independence of the independent accountants. The Audit

Committee is comprised of Sidney F. Wentz (Chairman), Michael G. Atieh, Bruce

L. Crockett, Peter Menikoff, Robert Ripp and Gary M. Stuart. The Audit

Committee operates under a written charter, a copy of which is attached as


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Exhibit A to this proxy statement. The Audit Committee held four meetings

during the year ended December 31, 2000.

Compensation Committee

The Compensation Committee has responsibility for determining executive

compensation. The Compensation Committee is comprised of Bruce L. Crockett

(Chairman), Robert M. Hernandez, Roberto G. Mendoza, Thomas J. Neff and Sidney

F. Wentz. The Compensation Committee held four meetings during the year ended

December 31, 2000.

Executive Committee

Except as expressly limited by applicable law, by the Company's Memorandum

of Association or Articles or by the Board of Directors, the Executive

Committee may exercise all the powers and authorities of the Board of

Directors between meetings of the full Board of Directors, with its primary

focus to act for the full Board when it is not practical to convene meetings

of the full Board and to serve as a strategic sounding board for the Chairman

and Chief Executive Officer of the Company. The Executive Committee also has

responsibility for nominating directors and to review and make recommendations

to the full Board regarding director compensation. The Executive Committee

will consider a shareholder's suggestion for candidates if mailed to:

Secretary, ACE Limited, The ACE Building, 30 Woodbourne Avenue, Hamilton HM 08

Bermuda. Any such suggestion with respect to directors to be elected at the

Annual General Meeting to be held in 2002 must be received not later than

March 12, 2002 and must comply with Article 40 of the Company's Articles. The

Executive Committee also makes recommendations concerning succession plans for

senior executive officers of the Company and reviews the development and

performance of the Company's senior executive officers. The ExecutiveCommittee is comprised of Robert M. Hernandez (Chairman), Brian Duperreault,

Donald Kramer, Roberto G. Mendoza, Thomas J. Neff and Robert W. Staley. The

Executive Committee held four meetings during the year ended December 31,

2000.

Finance Committee

The Finance Committee of the Board of Directors reviews the Company's

investment policy to ensure that it is consistent with the Company's goals,

strategies and objectives. Overall investment guidelines are approved by the

Finance Committee to ensure that appropriate levels of portfolio liquidity,

credit quality, diversification, and volatility are maintained. The Finance

Committee is comprised of Peter Menikoff (Chairman), Meryl D. Hartzband, Glen

M. Renfrew (who will retire from the Board at the Annual General Meeting),

Robert Ripp, Walter A. Scott, Dermot F. Smurfit and Gary M. Stuart. The

Finance Committee held four meetings during the year ended December 31, 2000.

5

Director Compensation

Pursuant to the Company's 1995 Outside Directors Plan, non-management

directors of the Company are awarded an annual "retainer award" in the form of

Ordinary Shares having a fair market value of $35,000. A director completing

less than a full year of service receives a pro rata portion of the annual

retainer award. The retainer award is made as of the date of the Company's

annual general meeting. The fair market value of the Ordinary Shares is

determined as of the award date. The value of any fractional share is

generally distributed in cash. Directors vest in the retainer award shares as

of the day immediately preceding the next annual general meeting. All retainer

award shares become fully vested upon a "change in control" of the Company (as

defined in the plan), or if the director ceases service as a director because

of death or disability. If a director ceases service as a director for any

other reason, all unvested retainer award shares are forfeited.

In addition, each director who serves as the chairman of any committee of

the Board during any plan year quarter is awarded a "committee chairman award"

as of the first business day of the next following plan quarter (generally

ninety-day periods following the annual general meeting), which award is the

number of Ordinary Shares having a fair market value, determined as of such

date, of $1,250 per quarter. All shares awarded as a committee chairman award

are fully vested at the time of award. In addition, a director may elect to

receive his committee chairman award in cash.

Directors are also paid $3,000 for attendance at each meeting of the Board

of Directors and $1,000 for attendance at each meeting of a committee of the


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Board of Directors. A director may elect to receive meeting fees in the form

of fully vested Ordinary Shares. Directors are also reimbursed for their

reasonable expenses in connection with Board service.

A director may elect to defer the receipt of Ordinary Shares or cash

otherwise payable.

Based on discussions with William M. Mercer, Incorporated, an independent

consulting firm, the Board of Directors is considering option grants as an

additional compensation tool for outside directors, but no option awards have

yet been made.

Certain Business Relationships

Certain shareholders of the Company and their affiliates, including the

employers of or entities otherwise associated with certain directors and

officers and their affiliates, have purchased insurance from the Company on

terms the Company believes were no more favorable to these insureds than those

made available to other customers.

The Company and its subsidiaries pay to affiliates of Marsh & McLennan

Companies, Inc. ("Marsh & McLennan") normal and customary commissions for

brokerage activities performed in connection with the placing of insurance.

William M. Mercer, Incorporated, an employee benefits consulting firm and a

wholly-owned subsidiary of Marsh & McLennan, advises the Compensation

Committee of the Company's Board of Directors and receives customary fees in

connection therewith.

The Company has entered into a Consulting Agreement dated as of January 1,

2000 with Kramer Capital Corporation. Donald Kramer is a part time employee ofKramer Capital Corporation. Pursuant to the Consulting Agreement, Kramer

Capital Corporation provides consulting services to the Company with respect

to strategic opportunities and trends in the insurance and financial services

industry. The Consulting Agreement specifies that Mr. Kramer and others will

be made available to perform these services for the Company. The Company will

pay Kramer Capital Corporation fees as agreed in writing from time to time.

The Company will also reimburse Kramer Capital Corporation for reasonable out-

of-pocket expenses. The Company paid Kramer Capital Corporation approximately

$300,000 for services performed during 2000 and expects to pay a similar

amount for services to be performed by Kramer Capital Corporation during 2001.

Mr. Kramer has no financial interest in Kramer Capital Corporation, either

directly or indirectly through a related person, and will receive a salary of

$100,000 as compensation for his services to Kramer Capital Corporation during

the year 2000.

6

In March 1999, the Company made a $250,000 housing loan to Dominic

Frederico. In January 2001, the Company loaned Mr. Frederico an additional

$350,000. The loans bear interest at 4.75% and 5.61%, respectively, being the

"Applicable Federal Rate" as determined in accordance with Section 7872(f)(2)

of the Internal Revenue Code of 1986, as amended, as of the date of each loan.

On each of March 23, 2000 and March 23, 2001, $50,000, plus interest, of the

original note was forgiven. These loans become immediately due if Mr.

Frederico resigns from the Company voluntarily or if the Company terminates

him for cause.

In 1988, Capital Re Corporation, which the Company acquired in December

1999, made a loan to Jerome Jurschak, who is now President and Chief Executive

Officer of ACE Financial Services (formerly known as Capital Re Corporation).

This loan was made in order to equalize the after-tax economic benefits of

participation by executives in Capital Re Corporation's 1988 Stock Incentive

Plan in connection with awards of shares of restricted stock under such plan.

This loan bears interest at the "Applicable Federal Rate" as determined from

time to time in accordance with Section 7872(f)(2) of the Internal Revenue

Code of 1986, as amended. ACE Financial Services has agreed to forgive the

interest on this loan and has granted bonuses to pay income taxes attributable

to that forgiveness. This loan is due and payable on the earlier of three

years after the termination of employment with ACE Financial Services or the

realization by Mr. Jurschak of gain on the sale of the Ordinary Shares of the

Company received in exchange for the restricted common stock of Capital Re

Corporation granted under such plan. The amount outstanding under this loan is

$112,612.

Section 16(a) Beneficial Ownership Reporting Compliance


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Executive officers and directors of the Company are subject to thereporting requirements of Section 16 of the Securities and Exchange Act of1934, as amended (the "Exchange Act"). Dennis Reding was late in reporting atransaction by his wife which has now been reported on his Form 5.

7

BENEFICIAL OWNERSHIP OF ORDINARY SHARES

Directors and Officers

The following table sets forth information, as of March 15, 2001, withrespect to the beneficial ownership of Ordinary Shares by Brian Duperreault,the Company's Chairman and Chief Executive Officer (the Company's "CEO"), theCompany's other four most highly compensated executive officers for 2000 (the"Named Executive Officers"), each of the Company's directors and by alldirectors and executive officers of the Company as a group. Unless otherwiseindicated, the named individual has sole voting and investment power over the

Ordinary Shares under the column "Ordinary Shares Beneficially Owned." TheOrdinary Shares listed for each director and each executive officer constituteless than one percent of the outstanding Ordinary Shares, except for John R.Charman (who is no longer an executive officer of the Company) for whom theshares listed constitute approximately 1.28% of the outstanding OrdinaryShares of the Company. The Ordinary Shares owned by all directors andexecutive officers as a group, excluding John R. Charman, constituteapproximately 3.22% of the outstanding Ordinary Shares.

OrdinaryShares

Ordinary SubjectShares to Restricted

Beneficially Option OrdinaryName of Beneficial Owner Owned (1) Shares (2)------------------------ ------------ --------- ---------- Brian Duperreault (3).................. 237,589 1,381,666 260,000Dominic J. Frederico................... 38,350 320,000 138,000John R. Charman (3).................... 2,842,697 86,666 42,500Dennis B. Reding....................... 40,581 88,332 71,500Donald Kramer.......................... 126,531 1,147,729 28,917Michael G. Atieh (4)................... 12,176 -- 1,230Bruce L. Crockett (4).................. 24,220 -- 1,230Meryl D. Hartzband (4) (5)............. 2,457 -- 1,230Robert M. Hernandez (4)................ 44,299 -- 1,230

Roberto G. Mendoza (4)................. 6,568 -- 1,230Peter Menikoff (3) (4)................. 24,365 -- 1,230Thomas J. Neff (4)..................... 10,091 -- 1,230Glen M. Renfrew (3).................... 79,978 -- 1,230Robert Ripp (4)........................ 15,876 -- 1,230Walter A. Scott (4).................... 213,129 330,000 1,230Dermot F. Smurfit...................... 3,906 -- 1,230Robert W. Staley....................... 10,366 -- 1,230Gary M. Stuart (4)..................... 9,082 -- 1,230Sidney F. Wentz (3).................... 14,363 -- 1,230All directors & executive officers as agroup(32 individuals)(3)................... 4,431,012 4,918,307 1,120,473

--------(1) Represents Ordinary Shares which the reporting person has the right to

acquire within 60 days of March 15, 2001 pursuant to options.(2) The reporting person has the right to vote (but not dispose of) the

Ordinary Shares listed under "Restricted Ordinary Shares."(3) Messrs. Duperreault, Charman, Menikoff, Renfrew and Wentz had shared power

to vote and/or dispose of 100, 24,619, 10,800, 15,000 and 6,000,respectively, of the Ordinary Shares listed. The directors and officershave shared power to vote and/or dispose of 60,869, in the aggregate, ofthe shares listed as owned by the directors and officers as a group. TheOrdinary Shares listed for Mr. Charman also include 1,973,657 sharessubject to trust arrangements for the benefit of Mr. Charman and/or hisfamily for which Mr. Charman does not have power to vote or dispose. OnMarch 19, 2001, the Company announced the departure of Mr. Charman asgroup president and chief executive officer of the ACE InternationalGroup. Accordingly, Mr. Charman is no longer an executive officer of the


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Company.

8

(4) The amounts included under "Ordinary Shares Beneficially Owned" and"Restricted Ordinary Shares" include certain Ordinary Shares for which thereporting person has elected to defer receipt. The reporting person hasthe right to dispose of (but not to vote) such Ordinary Shares.

(5) Ms. Hartzband serves as an officer of MMC Capital Inc., which is asubsidiary of Marsh & McLennan Risk Capital Holdings, Ltd. which as of

February 28, 2001 held 3,189,613 Ordinary Shares of ACE, representing 1.4% of the Ordinary Shares outstanding. These shares are not included in Ms.Hartzband's totals.

Other Beneficial Owners

The following table sets forth information regarding each person known bythe Company (including corporate groups) to own of record or beneficially own

more than five percent of the Company's outstanding Ordinary Shares as of thedates indicated below.

Number ofShares

Beneficially PercentName and Address of Beneficial Owner Owned of Class------------------------------------ ------------ --------

FMR Corp (1).............................................. 15,463,880 6.65%82 Devonshire StreetBoston, Massachusetts 02109-3614

Franklin Resources, Inc. (2).............................. 16,851,229 7.25%777 Mariners Island Blvd.P.O. Box 7777San Mateo, California 94404-7777

Putnam Investments, LLC (3)............................... 13,089,908 5.63%One Post Office SquareBoston, MA 02109

State Street Research & Management Company (4)............ 12,797,019 5.50%One Financial CenterBoston, MA 02111

Wellington Management Company, LLP (5).................... 15,556,229 6.70%75 State StreetBoston, Massachusetts 02109--------(1) As of February 28, 2001, based on information provided to the Company by

Fidelity Management & Research Company ("Fidelity") in March 2001. FMRCorp ("FMR") held 15,463,880 Ordinary Shares on behalf of its directsubsidiaries: Fidelity, 82 Devonshire Street, Boston, Massachusetts,02109, a wholly-owned subsidiary of FMR and a registered investmentadviser under the Investment Advisers Act of 1940, was the beneficialowner of 13,927,600 Ordinary Shares as a result of acting as investmentadvisor to various investment companies. Fidelity Management TrustCompany, 82 Devonshire Street, Boston, Massachusetts 02109, a wholly-ownedsubsidiary of FMR, and a bank, as defined in Section 3(a)(6) of theSecurities Exchange Act of 1934, was the beneficial owner of 367,580

Ordinary Shares as a result of serving as investment manager of theinstitutional accounts. Fidelity International Limited, Pembroke Hall, 42Crow Lane, Hamilton Bermuda, an indirect subsidiary of FMR, was thebeneficial owner of 1,168,700 Ordinary Shares.

(2) As of December 31, 2000, based on a Schedule 13G filed by FranklinResources, Inc. ("FRI"). According to such Schedule 13G, FRI is a parentholding company, in accordance with Rule 13d-1(b)(1)(ii)(G), of investmentadvisors to the Franklin/Templeton Group of Funds (the "AdviserSubsidiaries"). As of December 31, 2000, FRI, its principal shareholdersand the Adviser Subsidiaries may be deemed to have beneficial ownership of16,851,229 Ordinary Shares.

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(3) As of February 28, 2001, based on information provided to the Company byPutnam Investments, LLC in March 2001.

(4) As of February 28, 2001, based on information provided to the Company byState Street Research & Management Company ("SSRM") in March 2001. SSRM is

a registered investment advisor under section 203 of the InvestmentAdvisers Act of 1940. As of February 28, 2001, SSRM, in its capacity asinvestment advisors, may be deemed to have beneficial ownership of12,797,019 Ordinary Shares that are owned by numerous investment advisoryclients, none of which is known to have such interest with respect to morethan five percent of the class. SSRM disclaims any beneficial ownership in

such shares.(5) As of December 31, 2000, based on a Schedule 13G/A filed by Wellington

Management Company, LLP ("WMC"). WMC is a registered investment advisorunder the Investment Advisers Act of 1940. As of December 31, 2000, WMC,in its capacity as investment advisors, may be deemed to have beneficialownership of 15,556,229 Ordinary Shares that are owned by numerousinvestment advisory clients, none of which is known to have such interestwith respect to more than five percent of the class.

Other than as disclosed above, there are no persons who own of record, orare known by the Company to beneficially own, as of February 28, 2001, morethan five percent of the Company's outstanding Ordinary Shares.

10

EXECUTIVE COMPENSATION

The following table sets forth, in summary form, compensation earned by theCompany's CEO and by the Named Executive Officers of the Company for theperiods presented.

Summary Compensation Table

Long-Term CompensAnnual Compensation A

------------------------------------------- -------------------Sec

Restricted UnName and Other A

Principal Position Fiscal Year (1) Salary Bonus Compensation (2) Awards------------------ --------------- -------- ---------- ---------------- ----------- Brian Duperreault.......... 2000 $875,000 $2,000,000(6) $284,925

Chairman and Chief 1999 $800,000 $1,400,000 $222,660 $1,15Executive Officer 1998S $175,000 -- $ 48,500 ACE Limited 1998 $662,500 $1,400,000 $207,758 $1

Dominic J. Frederico....... 2000 $650,000 $1,250,000(6) $ 81,517 Group President and Chief 1999 $525,000 $ 650,000 $153,359 $ 772,5Executive Officer, U.S. 1998S $ 93,750 -- -- and Bermuda Group and 1998 $361,250 $ 350,000 $160,769 $2,221President and ChiefOperating Officer ACELimited

John R. Charman (9)....... 2000 $616,250 $1,899,413(10) -- former Group President and 1999 $633,558 $2,436,246(11) -- $ 386,2Chief Executive Officer, 1998S $153,141 -- --

ACE International Group 1998 $153,141 $1,427,433(12) --

Dennis Reding.............. 2000 $525,000 $ 750,000 -- President & CEO 1999 $416,346 $ 976,563(13) -- $ ACE USA 1998S $ 94,231 -- --

1998 $264,423 $1,800,000(13) -- $1,185,000

Donald Kramer.............. 2000 $525,000(14) $ 625,000(6) -- Vice Chairman 1999 $547,211 $ 500,000 -- ACE Limited 1998S $125,000 -- --

1998 $493,750 $ 500,000 -- $ 296,-------(1) During 1999, the Company changed its fiscal year from the twelve months

ended September 30 to the twelve months ended December 31. In this table,


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the 2000 and 1999 fiscal years represent the twelve-month period endedDecember 31, 2000 and December 31, 1999, respectively. The 1998 fiscalyear represents the twelve-month period ending September 30, 1998. The1998S period represents the three-month period ended December 31, 1998.

(2) Other annual compensation for the year ended December 31, 2000 includes

commuting and living expenses in respect of Messrs. Duperreault andFrederico in the amount of $194,000 and $76,151, respectively and inrespect of Mr. Duperreault also includes $64,817 for personal travel onthe Company's jet; for the year ended December 31, 1999 includes commutingand living expenses in respect of Messrs. Duperreault and Frederico in theamount of $194,000 and $126,500, respectively; for the three months ended

December 31, 1998 includes commuting and living expenses of $48,500 inrespect of Mr. Duperreault; and for the year ended September 30, 1998includes commuting and living allowances in respect of Messrs. Duperreaultand Frederico in the amounts of $203,683 and $158,619, respectively.

(3) As of December 31, 2000, the number and value of restricted OrdinaryShares held by each of the above named executive officers was: Mr.Duperreault--205,000 ($8,699,688), Mr. Frederico--105,000 ($4,455,938),Mr. Kramer--17,917 ($760,353), Mr. Charman--15,000 ($636,563) and Mr.

Reding--55,000 ($2,334,063). Such values were determined by multiplyingthe number of shares by $42.4375 (the closing price of the Ordinary Shareson the New York Stock Exchange (the "NYSE") on December 31, 2000).

11

(4) This column has been adjusted to give effect to the three-for-one stocksplit of the Ordinary Shares. The record date for the stock split wasFebruary 17, 1998 and certificates were mailed to shareholders in

connection with the stock split on March 2, 1998.(5) All other compensation represents contributions by the Company to defined

contribution plans on behalf of the named individuals for the aboveamounts.

(6) These bonuses were awarded with respect to a 15-month period from October

1, 1999 through December 31, 2000.(7) In order to take into account the performance during 2000, the

Compensation Committee decided to make restricted stock and option awardsat its February 2001 meeting instead of its November 2000 meeting.Accordingly, there were no restricted stock or option awards during 2000.However, the Compensation Committee intended such awards as compensationfor 2000. These awards and grants are therefore reported in the subsequenttables entitled "2001 Restricted Stock Awards" and "2001 Option Grants."

(8) The value of the restricted shares awarded to the individuals in respectof the year ended December 31, 1999 was determined by multiplying thenumber of shares awarded by the closing price of the Ordinary Shares onthe NYSE on the date of the grant. With the exception of 15,000 OrdinaryShares awarded to Mr. Reding on July 1, 1999, when the closing price of

the Ordinary Shares on the NYSE was $28.4375, all restricted sharesawarded in 1999 were awarded on November 18, 1999, on which date theclosing price for Ordinary Shares on the NYSE was $19.3125. The value ofthe restricted shares awarded to the individuals in respect of the yearended September 30, 1998 was determined by multiplying the number ofshares awarded by the closing price of the Ordinary Shares on the NYSE onNovember 12, 1998 ($29.6250), in each case the date of the award. Thenumber of restricted Ordinary Shares awarded to each of the CEO and theNamed Executive Officers, as adjusted to give effect to the stock split,was:

Fiscal FiscalName 1999 1998---- ------ ------

Brian Duperreault........................................... 60,000 40,000Dominic J. Frederico........................................ 40,000 75,000Donald Kramer............................................... 15,000 10,000John R. Charman............................................. 20,000 --Dennis Reding............................................... 35,000 40,000

With respect to all restricted Ordinary Shares awarded to the CEO and theNamed Executive Officers in 1999, except for 15,000 of the 35,000restricted Ordinary Shares awarded to Mr. Reding, the restrictions withrespect to one-quarter of the Ordinary Shares lapse on each of the first,second, third and fourth anniversary of the date of the awards. Therestrictions on such 15,000 Ordinary Shares awarded to Mr. Reding in 1999


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will lapse at the end of the first anniversary of the date of the award.With respect to the 10,000 restricted Ordinary Shares awarded to Mr.Kramer in 1998, the restrictions with respect to one-third of the OrdinaryShares lapse on each of the second, third and fourth anniversary of thedate of the award. With respect to the 75,000 restricted Ordinary Shares

awarded to Mr. Frederico and the 40,000 restricted Ordinary Shares awardedto Mr. Reding in 1998, the restrictions with respect to one-third of theOrdinary Shares lapse on each of the third, fourth and fifth anniversaryof the date of the awards. With respect to the 40,000 restricted OrdinaryShares awarded to Mr. Duperreault in 1998, the restrictions with respectto 8,000 Ordinary Shares lapse on November 12, 2001, the restrictions with

respect to 16,000 Ordinary Shares lapse on November 12, 2002, and therestrictions with respect to 16,000 Ordinary Shares lapse on November 12,2003. During the restricted period, the executive officers are entitled tovote the Ordinary Shares and receive dividends.

(9) Mr. Charman was paid in pounds sterling. His 2000 compensation information(other than restricted stock and stock options) has been calculated usingthe pound to dollar exchange rate for December 31, 2000 of 1.4930, asreported by Bloomberg; his 1999 compensation information (other than

restricted stock and options) has been calculated using the pound todollar exchange rate for December 31, 1999 of 1.6182, as reported byBloomberg; and his 1998 and 1998S compensation information (other thanrestricted stock and options) has been calculated using the pounds todollar exchange rate for December 31, 1998 of

12

1.6875, as reported by Bloomberg. On March 19, 2001, the Company announced

Mr. Charman's departure as group president and chief executive officer ofACE International Group.

(10) Includes a retention bonus of (Pounds)736,378 (valued at $1,099,413 usingthe December 31, 2000 exchange rate of 1.4930 as reported by Bloomberg)in connection with the Company's Tarquin acquisition.

(11) Includes a retention bonus of (Pounds)705,528 (valued at $1,141,686 usingthe December 31, 1999 exchange rate of 1.6182 as reported by Bloomberg)in connection with the Company's Tarquin acquisition.

(12) Consists of a retention bonus of (Pounds)845,866 (valued at $1,427,433using the exchange rate for December 31, 1998 of 1.6875, as reported byBloomberg).

(13) Includes a retention bonus paid in connection with the Company'sWestchester acquisition and, for 1999, an award of 15,000 fully vestedOrdinary Shares on July 1, 1999, on which date the closing price on theNYSE was $28.4375.

(14) Includes $100,000 salary from Kramer Capital Corporation, which theCompany has retained for consulting services. See Certain BusinessRelationships.

The following table sets forth information concerning the number ofunexercised stock options outstanding at December 31, 2000, and the value ofany unexercised in-the-money stock options outstanding at such time, held bythe Company's CEO and the Named Executive Officers. There were no stockappreciation rights outstanding at December 31, 2000.

Option Values at December 31, 2000

Number of SecuritiesUnderlying Unexercised Value of Unexercised In-

Options/SARs at the-Money Options atFiscal Year-End (#) Fiscal Year-End ($)

Name Exercisable/Unexercisable Exercisable/Unexercisable

---- ------------------------- ------------------------- Brian Duperreault........... 1,381,666/153,333 $38,745,696/$3,133,326Dominic J. Frederico........ 320,000/85,000 $ 6,708,125/$1,707,813John R. Charman............. 86,666/73,334 $ 1,316,658/$1,352,092Dennis Reding............... 73,332/61,668 $ 1,050,810/$1,103,566Donald Kramer............... 1,147,729/50,001 $ 36,964,581/$ 984,395

Awards Made in 2001 Relating to the Last Fiscal Year

Although in the past the Compensation Committee has granted equity basedawards at its November meetings, the Compensation Committee decided to moveconsideration of awards of restricted stock and option grants to its February


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2001 meeting in order to take year end results into its consideration.Accordingly, no restricted stock or options were awarded in the 2000 fiscalyear. However, the awards made in February 2001 relate to compensation for theyear 2000 and are therefore reported below.

2001 Restricted Stock Awards

The following table sets forth information concerning restricted stockawards in February 2001 to the CEO and the Named Executive Officers.

Restricted Stock

Name Awards (1)---- ---------------- Brian Duperreault........................................ $1,996,500Dominic J. Frederico..................................... $1,197,900John R. Charman.......................................... $ 998,250

Dennis Reding............................................ $ 598,950Donald Kramer............................................ $ 399,300

13

--------(1) The value of the restricted shares awarded to the individuals in February

2001 was determined by multiplying the number of shares awarded by the

closing price of the Ordinary Shares on the NYSE on the date of the grant.All such restricted shares were awarded on February 22, 2001, on whichdate the closing price for Ordinary Shares on the NYSE was $36.30. Thenumber of restricted Ordinary Shares awarded to each of the CEO and theNamed Executive Officers was:

Number of RestrictedName Ordinary Shares---- -------------------- Brian Duperreault.................................... 55,000Dominic J. Frederico................................. 33,000John R. Charman...................................... 27,500Dennis Reding........................................ 16,500Donald Kramer........................................ 11,000

With respect to all restricted Ordinary Shares awarded to the CEO and theNamed Executive Officers in February 2001, the restrictions with respect toone-quarter of the Ordinary Shares lapse on each of the first, second, thirdand fourth anniversary of the date of the awards.

2001 Option Grants

The following table sets forth information concerning awards of stockoptions made to the Company's CEO and to the Named Executive Officers inFebruary 2001. No stock appreciation rights were awarded during or withrespect to the year ended December 31, 2000.

Potential Realized Value

Percent of at Assumed AnnNumber of Total Options Stock Price AOptions Awarded to Exercise or for Option

Awarded in Employees in Base Price -------------------Name February 2001 February 2001 ($/Sh) Expiration Date 5% ---- ------------- ------------- ----------- ----------------- ------------ ------- Brian Duperreault....... 462,000(1) 14.32% $36.30 February 22, 2011 5,022,352 12,7Dominic J. Frederico.... 82,500(2) 2.56% $36.30 February 22, 2011 1,883,382 4John R. Charman......... 66,000(2) 2.05% $36.30 February 22, 2011 1,506,706 3Dennis Reding........... 44,000(2) 1.36% $36.30 February 22, 2011 1,004,470 2Donald Kramer........... 38,500(2) 1.19% $36.30 February 22, 2011 878,912 --------


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(1) 220,000 options vest one-third on the first, second and third anniversary

of the grant and 242,000 options vest on the fifth anniversary of the

grant.

(2) Options vest one-third on the first, second and third anniversary of the

grant.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee of the Company's Board of Directors has

responsibility for determining the compensation of the Company's executive

officers. None of the members of the Compensation Committee was an officer or

employee of the Company. No officer or employee of the Company serves on thecompensation committee of any company that employs any member of the

Compensation Committee.

Employment Agreements

The following is intended to be a summary of the terms of the employment

agreements entered into between the Company and the executive officers named

below.

The Company has entered into an agreement with Brian Duperreault. This

agreement provided for a base salary of $550,000 per year, subject to

increase. Effective January 1, 2001, Mr. Duperreault's annual base salary is

$925,000. The agreement also provides for an annual discretionary bonus. Mr.

Duperreault is also eligible to participate in the Company's benefit plans.

Pursuant to an Option and Restricted Share Agreement and Plan entered into in

connection with Mr. Duperreault's employment agreement, Mr. Duperreault was

awarded 300,000

14

restricted shares and options to purchase 900,000 Ordinary Shares at $7.542

per Ordinary Share (each as adjusted to give effect to the stock split). All

of the aforementioned shares of restricted stock have vested and all of the

aforementioned options are now exercisable. The aforementioned options will

expire on September 30, 2004. During the 1998 fiscal year Mr. Duperreault

exercised the aforementioned options with respect to 195,000 Ordinary Shares.

Mr. Duperreault may exercise any of the options for a period of one year if

his termination is by reason of his death or disability or by the Company

without cause and for 30 days if such termination is by the Company for cause

or voluntarily by Mr. Duperreault. The agreement also provides Mr. Duperreault

with customary executive benefits, including participation in the Company's

retirement plan, the Company's supplemental executive retirement plan, various

insurance plans, reimbursement of housing and certain personal travel expenses

and, generally, such other benefit programs as are available to the Company's

other senior executives. The agreement is now subject to automatic one-yearrenewals unless notice of non-renewal is provided by the Company's Board of

Directors. In addition, if, following a change in control, Mr. Duperreault's

employment is terminated without cause, his salary and benefits will continue

for 12 months and he will be entitled to any previously awarded but unpaid

bonus and a bonus for any uncompleted fiscal year based upon the bonus for the

last completed fiscal year and the number of days in the then current fiscal

year in which he was employed. Pursuant to the agreement, Mr. Duperreault has

agreed not to engage in any activity in Bermuda or the Cayman Islands for a

period of 12 months following termination of his employment with the Company

that would compete with any business being conducted by the Company or its

subsidiaries, or which was actively being developed by the Company or its

subsidiaries during the term of Mr. Duperreault's employment.

A "change in control" under Mr. Duperreault's employment agreement is

generally deemed to occur when (i) any person becomes the beneficial owner of

50% or more of the voting stock of the Company, (ii) the majority of the Board

consists of individuals other than Incumbent Directors, which term means the

members of the Board on the date of the Agreement; provided that any person

becoming a director subsequent to such date whose election or nomination for

election was supported by three-quarters of the directors who then comprised

the Incumbent Directors shall be considered to be an Incumbent Director; (iii)

the Company adopts any plan of liquidation providing for the distribution of

all or substantially all of its assets; (iv) all or substantially all of the

assets or business of the Company are disposed of pursuant to a merger,

consolidation or other transaction (unless the shareholders of the Company

immediately prior to such merger, consolidation or other transaction

beneficially own, directly or indirectly, in substantially the same proportion

as they owned the voting stock of the Company, all of the voting stock or

other ownership interests of the entity or entities, if any, that succeed to


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the business of the Company); or (v) the Company combines with another company

and is the surviving corporation but, immediately after the combination, the

shareholders of the Company immediately prior to the combination hold,

directly or indirectly, 50% or less of the voting stock of the combined

company.

The Company has entered into an agreement with Dominic J. Frederico,

pursuant to which he serves as President and Chief Operating Officer, ACE

Limited. The agreement provided for a base salary of $320,000 per year,

subject to increase, an annual discretionary bonus plus participation in the

Company's benefit plans. Effective January 1, 2001, Mr. Frederico's annual

base salary is $800,000. Pursuant to his agreement, Mr. Frederico was awardedoptions to purchase 30,000 Ordinary Shares at $7.625 per Ordinary Share (as

adjusted to give effect to the stock split). These options have become

exercisable and expire on January 9, 2005. The agreement also provides Mr.

Frederico with customary executive benefits, including participation in the

Company's retirement plan, the Company's supplemental executive retirement

plan, various insurance plans, reimbursement of housing and certain personal

travel expenses and, generally, such other benefit programs as are available

to the Company's other senior executives. The agreement is now subject to

automatic one-year renewals unless notice of non-renewal is provided by the

Company. Upon termination without cause, Mr. Frederico's salary and benefits

are agreed to continue for 24 months and any previously awarded but unpaid

bonus is to be paid. Pursuant to the agreement, Mr. Frederico has agreed not

to engage in any activity in the United States, Bermuda or the Cayman Islands

for a period of 12 months following his termination of employment with the

Company that would compete with the business of the Company.

On March 19, 2001, the Company announced the departure of John R. Charman

as Group President and Chief Executive Officer of ACE International Group.Prior to such departure, the Company had entered into an

15

agreement with John R. Charman, which provided for a base salary of $587,407

per year, subject to increase, an annual discretionary bonus and a retention

bonus of $2.2 million which was paid in two equal installments. The agreement

also provided Mr. Charman with customary executive benefits, including

participation in an executive pension plan, various insurance plans and a car

allowance plan. The agreement was for a five year term which began July 9,

1998. The agreement provided that Mr. Charman would not engage in any activity

for a period of 12 months following his termination of employment with the

Company that would compete with the specified business of the Company in

London. The Company is still assessing the impact of Mr. Charman's departure

on the terms of this agreement and Mr. Charman's position with respect

thereto.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors (the "Committee") is

comprised entirely of independent, non-management directors. The Committee has

responsibility for developing and implementing the Company's compensation

policy for senior management, and for determining the compensation for the

executive officers of the Company. The goal of the Committee is to achieve

fair compensation for the individuals and to enhance shareholder value by

continuing to closely align the financial rewards of management with those of

the Company's shareholders.

The Company's compensation program is structured to support the human

resource requirements of its business. The Company seeks to attract and retain

qualified executives who are creative, motivated and dedicated. With respect

to its executive officers, the Company competes with property and casualty

insurers, specialty insurers, and financial companies worldwide, although

primarily with companies based in North America and Europe. The Committee is

aware of the unique circumstances which relate to the attraction and retention

of superior executives in Bermuda, and attempts to create and administer a

compensation program to achieve that result, while at the same time

implementing integrated compensation principles for its employees worldwide.

Each executive's total compensation is generally comprised of three

components: salary, annual incentive compensation awards and long-term

incentive compensation awards. The mix of an officer's total compensation is

generally based upon the level of the officer's position, with more senior

officers receiving a greater percentage of their total compensation in the

form of incentive compensation (i.e. variable compensation), and a lesser

percentage in the form of salary (i.e. fixed compensation).


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Salary and incentive compensation awards are reviewed annually for

competitiveness and are determined in large part by reference to compensation

levels for comparable positions at comparable companies based in the United

States, Bermuda, and Europe. Generally, the Company targets the third to upper

quartile of this peer group in establishing incentive compensation, and the

median to third quartile in establishing salaries. Actual salary may be above

or below such targets based on individual evaluations. Incentive compensation

may be above or below such targets based on individual and corporate

performance during the prior fiscal year.

In determining compensation for each senior executive, the Committee hasbeen assisted by William M. Mercer, Incorporated ("Mercer"), an independent

consulting firm which is a subsidiary of Marsh & McLennan Companies, Inc. and,

with respect to the Chief Executive Officer, by Frederic W. Cook & Inc.

("Cook"), also an independent consulting firm. Mercer has accumulated

compensation data from a peer group of companies that ACE considers comparable

to it. The Committee took this data into consideration in determining

compensation.

Because the Company's business activities can result in significant

earnings fluctuations from year to year, each executive's contribution to the

advancement of long-term corporate goals is also considered. These goals

include, among other things, underwriting and financial results, business

production, development of the management team and strategic steps such as

development of new products and lines of business, geographical spread of

business and acquisitions.

16

Salary

The Committee analyzed ACE's peer group data to establish competitive

salary ranges for comparable positions primarily in insurance companies of

generally comparable size, market capitalization and complexity. The Company's

Chief Executive Officer makes recommendations to the Committee with respect to

the salary of each senior executive other than himself. The Committee

discusses these recommendations, and the relevant data, and then determines

the senior executives' salaries. The Committee meets separately to determine

the salary of the Company's Chief Executive Officer.

Annual Incentive Compensation

At the conclusion of each fiscal year, the Committee reviews with the

Company's Chief Executive Officer the performance of each senior executive

against goals established at the beginning of the year. Based upon the overallperformance of the Company and the contribution by the individuals in

achieving that performance by attaining the established goals, such as

leadership and management competencies, alignment with strategic initiatives

(including where applicable, financial performance), and development of

corporate culture, the Company's Chief Executive Officer recommends to the

Committee annual incentive compensation levels for each executive that reports

directly to the Chief Executive Officer, as well as for certain other senior

executives. The Committee considers his recommendations, and the relevant

data, and then determines the annual incentive compensation for each such

executive. The Committee meets separately to evaluate the performance of the

Chief Executive Officer and determine his annual incentive award.

Long-Term Incentive Compensation

The Company has established long-term incentive plans which use equity

awards to create incentives for employees to enhance the long-term value of

the Company. The goal of the long-term incentive plans is to align executives'

interests with long-term shareholder interests by making equity an important

component of compensation packages. In furtherance of the objectives of these

plans, the Committee established a set of goals, including:

(i) increasing officer ownership of the Company's outstanding shares by

reviewing and establishing target levels of ownership for its

officers to achieve over time, based on their respective positions

with the Company and monitoring progress towards achievement of

such target levels of officer ownership;

(ii) awarding long-term incentive awards at competitive levels

annually; and


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(iii) providing capital accumulation opportunities that fosterattraction and retention of key management employees by linkingtheir interests with shareholder interests.

With respect to guidelines for administering its long-term incentive plans,the Committee makes long-term compensation awards based on individual andCompany performance, and on the practices of ACE's group of generallycomparable insurance companies. While the long-term incentive plans providefor a range of types of awards, the Committee has generally made awards in theform of stock options and/or restricted stock. The Committee believes that

awards of stock options, which reward Company stock price appreciation overthe long-term, are particularly appropriate in light of the nature of theCompany's business and long-term business plans. The Committee also believesthat restricted stock awards, particularly those with delayed vesting, arecrucial in helping to retain high caliber executives in an increasinglycompetitive labor market.

Chief Executive Officer's Fiscal 2000 Compensation

In determining Mr. Duperreault's annual and long-term incentive awards andadjustment to salary, the Committee reviewed, among other things, datagathered by Mercer on the compensation of ACE's peer group and the Company'sfinancial performance relative to those companies and received guidance fromCook. The Committee focused in particular on improved shareholder return andthe progress the Company made during the fiscal year with respect to theintegration of CIGNA's property and casualty business, as well as otheracquired businesses, and on the quantitative records set by the Company inpremiums written, revenues, net investment income, net operating income and

book value per share. The Committee believes that Mr. Duperreault madesignificant contributions to those accomplishments.

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The Committee believes that Mr. Duperreault's leadership has contributedgreatly to the Company's long-term financial strength. The Committee thereforefelt it was appropriate to award long-term compensation to Mr. Duperreault,including the special option award described below, at the higher end of therange of comparable compensation based on data provided by Mercer. TheCommittee increased Mr. Duperreault's long-term equity compensation so that itis a greater percentage of his total compensation package in order to closerapproximate the comparable percentage for his peer group and to reflect theCommittee's confidence in the Company's long-term prospects under Mr.Duperreault's direction. By so doing, the Committee rewarded Mr. Duperreaultfor completing important acquisitions and integrating the new businesses intothe Company, but tied the value of that award to the long-term performance of

the Company's stock price. In this way, the Committee has provided furtherincentive for the Company's Chief Executive Officer to continue to move theCompany forward as a larger international company. Long-term compensationawards such as options and restricted stock provided the Committee with theappropriate tools to achieve this desired result. In particular, the Committeeawarded Mr. Duperreault two types of options this year, as well as restrictedstock. The 220,000 options that vest over three years and the 55,000 shares ofrestricted stock that vest over four years are comparable to the type ofawards made to the Company's senior executives to provide long-term incentiveand to align management with shareholders' interests. This year, inrecognition of the importance of Mr. Duperreault to the Company and to furtherencourage him to continue in his position as Chief Executive Officer, theCommittee made an additional special award to Mr. Duperreault of 242,000options, all of which vest after the completion of five years following thegrant date.

The Committee also took into account improved financial performance andstock price. The Committee raised Mr. Duperreault's annual salary from$875,000 for the 2000 fiscal year to $925,000 for the 2001 fiscal year tobring the salary closer to the median annual salary of his peer group. TheCommittee believes that providing variable compensation in the form of bonusesrather than annual salary increases is an important tool to reward successeson a year to year basis, while providing an attractive compensation packagedesigned to encourage retention of a valuable employee. Based on this year'ssuccesses, the Committee awarded a $2,000,000 bonus to Mr. Duperreault for the15-month period from October 1, 1999 through December 31, 2000.

Under U.S. income tax rules, Section 162(m) of the Internal Revenue Codelimits the deductibility of annual compensation in excess of $1 million paidto the Company's Chief Executive Officer and any of the four other highest


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paid officers. However, compensation is exempt from this limit if it qualifies

as "performance based compensation." The limit has no direct application to

the Company, because the Company is not subject to U.S. income taxes. However,

if a U.S. subsidiary has an employee who is among the five most highly

compensated officers, that subsidiary's deduction will be subject to this

limit. To preserve the deduction for the subsidiary, the Company has designed

its long-term incentive plans to permit the grant of "performance-based

compensation" awards that are not counted toward the $1 million limit.

Although the Compensation Committee will consider deductibility under

Section 162(m) with respect to the compensation arrangements for executive

officers who may be employed by subsidiaries subject to U.S. income tax,deductibility will not be the sole factor used in determining appropriate

levels or methods of compensation. Since Company objectives may not always be

consistent with the requirements for full deductibility, the Company and

subsidiaries may enter into compensation arrangements under which payments

would not be deductible under Section 162(m). The foregoing report has been

approved by all members of the Committee.

Bruce L. Crockett, Chairman

Robert M. Hernandez

Roberto G. Mendoza

Thomas J. Neff

Sidney F. Wentz

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AUDIT COMMITTEE REPORT

The Audit Committee consists of six members of the Board of Directors, each

of whom is independent of the Company and its management, as defined by the

New York Stock Exchange listing standards. The Audit Committee operates under

a written charter, a copy of which is attached as Exhibit A to this proxy

statement.

The Audit Committee has reviewed and discussed the Company's December 31,

2000 audited consolidated financial statements with management and with

PricewaterhouseCoopers LLP, the independent accountants of the Company.

The Audit Committee has also discussed with PricewaterhouseCoopers LLP the

matters required to be discussed by Statement on Auditing Standards No. 61.

This included a) the auditor's judgments about the quality, not just the

acceptability, of the Company's accounting principles as applied in its

financial reporting, b) methods used to account for significant unusual

transactions, c) the effect of significant accounting policies in

controversial or emerging areas for which there is a lack of authoritative

guidance or consensus, d) the process used by management in formulatingparticularly sensitive accounting estimates and the basis for the auditor's

conclusions regarding the reasonableness of those estimates and e)

disagreements with management over the application of accounting principles,

the basis for management's accounting estimates, and disclosures in the

financial statements.

The Audit Committee has also received from PricewaterhouseCoopers LLP the

written disclosures and the letter required by Independence Standard's Board

Standard No. 1 regarding their independence, and has discussed with

PricewaterhouseCoopers LLP their independence and considered whether the

provision of other services referred to under "Fees Billed to the Company by

PricewaterhouseCoopers in 2000--All Other Fees" is compatible with maintaining

their independence.

Based on the review and discussions referred to above, and in reliance on

the information, opinions, reports or statements presented to the Audit

Committee by ACE's management, its internal auditors and its independent

accountants, the Audit Committee recommended to the Board of Directors that

the December 31, 2000 audited consolidated financial statements be included in

the Company's Annual Report on Form 10-K.

Sidney F. Wentz, Chairman

Michael G. Atieh

Bruce L. Crockett

Peter Menikoff

Robert Ripp

Gary M. Stuart

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Performance Graph

Set forth below is a line graph comparing the dollar change in the

cumulative total shareholder return on the Company's Ordinary Shares fromSeptember 30, 1995 through December 31, 2000 as compared to the cumulativetotal return of the Standard & Poor's 500 Stock Index and the cumulative totalreturn of the Standard & Poor's Property-Casualty Insurance Index. The chartdepicts the value on September 30, 1996, September 30, 1997, September 30,1998, December 31, 1999 and December 31, 2000 of a $100 investment made on

September 30, 1995, with all dividends reinvested.

S&P 500 S&P Property-CasualtyACE Limited Index Insurance Index----------- ------- ---------------------

9/30/95 $100 $100 $1009/30/96 $156 $120 $1129/30/97 $280 $169 $173

9/30/98 $271 $184 $15912/31/99 $154 $270 $12212/31/00 $398 $246 $194

APPROVAL OF AMENDMENT TO THE ACE LIMITED1998 LONG-TERM INCENTIVE PLAN

(Item B on Proxy Card)

A proposal will be presented at the Annual General Meeting to amend the ACELimited 1998 Long-Term Incentive Plan (the "1998 Plan") which was originally

approved by the Company's shareholders on February 5, 1999. On February 23,2001, the Board of Directors adopted, subject to shareholder approval, anamendment to the 1998 Plan which proposes to increase the total number ofshares of the Company's stock that are available for grants under the 1998Plan from 9,682,823 shares to 21,252,007 shares. The 11,569,184 share increase

represents slightly less than 5% of the outstanding Ordinary Shares of theCompany as of the record date for the Annual General Meeting. In addition, theamendment clarifies the operation of the minimum vesting provision in the 1998Plan regarding restricted stock and modifies the language of the 1998 Plan'stax withholding section to reflect recent changes in the accounting rules. Asummary of the material provisions of the 1998 Plan, as proposed to beamended, is set forth below and is qualified in its entirety by reference tothe 1998 Plan as proposed to be amended, set forth in Exhibit B hereto.

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Purpose

The Company established the 1998 Plan, and is proposing the amendment, to(a) attract and retain employees; (b) motivate participating employees bymeans of appropriate incentives to achieve long-range goals; (c) provideincentive compensation opportunities that are competitive with those of othermajor corporations; and (d) further align participants' interests with thoseof the Company's other shareholders through compensation that is based on theprice appreciation of the Ordinary Shares of the Company and thereby promotethe long-term financial interest of the Company, including the growth in valueof the Company's equity and enhancement of long-term shareholder return.

The Company adopted the 1998 Plan because it believes strongly in themerits of linking executives' overall compensation opportunities to theenhancement of long-term shareholder return. The Company uses equity basedcompensation, such as options and restricted stock, as key elements of itsexecutives' compensation packages. Awards under the 1998 Plan increase officer

ownership of the Company's stock, which is an important goal of the Company'slong-term compensation program. However, there is not a sufficient amount ofshares remaining under the 1998 Plan for the Company to provide appropriateequity incentives for its executives. Because the Company has more employeesas a result of its growth and because the Company believes it is important forits employees to have an equity interest in the Company, the Board ofDirectors approved the amendment to the 1998 Plan to increase the number ofOrdinary Shares available for awards, subject to shareholder approval.

To achieve the foregoing objectives, the 1998 Plan provides for the grantof non-qualified and incentive stock options, stock appreciation rights("SARs"), stock units, restricted stock units, performance shares, performanceunits and restricted stock.


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becomes the beneficial owner of 50% or more of the voting stock of the

Company, (ii) the majority of the Board consists of individuals other than

incumbent directors, which term means the members of the Board on the

effective date of the 1998 Plan; provided that any person becoming a director

subsequent to such date whose election or nomination for election was

supported by three-quarters of the directors who then comprised the incumbent

directors shall be considered to be an incumbent director; (iii) the Company

adopts any plan of liquidation providing for the distribution of all or

substantially all of its assets; (iv) all or substantially all of the assets

or business of the Company are disposed of pursuant to a merger, consolidation

or other transaction (unless the shareholders of the Company immediately prior

to such merger, consolidation or other transaction beneficially own, directlyor indirectly, in substantially the same proportion as they owned the voting

stock of the Company, all of the voting stock or other ownership interests of

the entity or entities, if any, that succeed to the business of the Company);

or (v) the Company combines with another company and is the surviving

corporation but, immediately after the combination, the shareholders of the

Company immediately prior to the combination hold, directly or indirectly, 50%

or less of the voting stock of the combined company.

All employees of the Company and its subsidiaries and any consultant,

director or other person providing services to the Company or a subsidiary are

eligible to become Participants in the 1998 Plan. The specific employees who

are granted awards under the 1998 Plan and the type and amount of any such

awards are determined by the Committee.

Options

The Committee may grant options to purchase the Company's Ordinary Shares

which may be either incentive stock options or non-qualified stock options.The purchase price of an Ordinary Share under each option shall not be less

than the fair market value of an Ordinary Share on the date the option is

granted. The option shall be exercisable in accordance with the terms

established by the Committee. The full purchase price of each Ordinary Share

purchased upon the exercise of any option shall be paid at the time of

exercise. Except as otherwise determined by the Committee, the purchase price

shall be payable in cash or in Ordinary Shares (valued at fair market value as

of the day of exercise), or in any combination thereof. The Committee, in its

discretion, may impose such conditions, restrictions, and contingencies on

Ordinary Shares acquired pursuant to the exercise of an option

2001-04-05 ace limited (nyse: ace) def 14a

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